Private equity LIT trades at premium (not discount) to NTA and raises money without selling fees!

Christopher Joye

Coolabah Capital

Russel Pillemer's Pengana Capital has announced a 1-for-3 rights issue, or capital raising, for its existing private equity listed investment trust (LIT), called the Pengana Private Equity Trust (ASX: PE1), which is interesting in at least three respects. 

First, PE1 has consistently traded at a premium to its net asset value (NAV) in contrast to the vast majority of other LITs, which trade at material discounts. This may be partly related to the fact that there is, in fact, a bona fide case for giving retail investors access to unlisted private equity via a listed structure because it is the only way to access the asset-class. (Of course, the same case could be made with other illiquid assets like private credit.)

On this note, Independent Investment Research's Rodney Lay comments in a new report that "PE1 has been near unprecedented for an ASX-listed LIT to the extent to has traded at a premium to NTA, and even more so exceptional given it is a relatively low FUM vehicle (which typically trade at a discount)".

Second, Pengana is not paying advisers conflicted remuneration, or selling fees, to promote PE1, which means it has to compete purely on its merits. These conflicted payments were recently banned by the Treasurer, Joshua Frydenberg, despite enormous industry lobbying to keep them. 

If PE1 can successfully raise capital, it will be proof-positive that good managers with a real consumer value proposition do not need to pay conflicted selling fees to attract money, which has been a consistent argument that I have made here.

Third, the underlying investment manager of PE1 is the Chicago-based Grosvenor Capital Management, which is a US$50 billion global alternative asset manager. 

The actual portfolio manager is GCM Managing Director, Frederick Pollock, whom I know personally. Fred is a brilliant Harvard law graduate, who originally studied at the University of Nevada where, if memory serves correctly, he was such an astute card-counter at the Las Vegas casinos that he was banned as a student from at least one. The house does not like ceding its edge!

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Christopher Joye
Portfolio Manager & Chief Investment Officer
Coolabah Capital

Chris co-founded Coolabah in 2011, which today runs over $8 billion with a team of 26 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha...

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